Policy Co-ownership Part of Best Interests Agenda

The Best Interests statute means clients whose circumstances may make them eligible to explore policy co-ownership opportunities must be made aware of this option.

So says MBS Insurance Founder, Kris Mason, who told Riskinfo that with the emergence of policy co-ownership as a valid option for some clients who would otherwise cancel their lump sum life insurance policies, any adviser who does not make their client aware of this possibility may risk exposure to future action from the client or their intended beneficiaries.

Policy co-ownership has re-entered the mainstream life insurance advice conversation since the emergence of policy services firm, iExtend, in early 2022 (see: Launch of iExtend).

According to Mason, all advisers should have a uniform cancellation process for all options available to their clients. When clients consider cancelling their lump sum life insurance policies, they often face emotional challenges that impact not only them but also their beneficiaries. Mason says the advisers operating within MBS’s growing national network of risk advice businesses, should be knowledgeable about all the available options as an alternative for clients wanting to cancel their lump sum contracts.

Advisers don’t want to find themselves in a situation where a spouse asks why the possibility of policy co-ownership was not offered

Not only should they be aware of the option, but given the Best Interests statute brought in as a part of the Future of Financial Advice reforms in 2012, Mason cautions that: “Advisers don’t want to find themselves in a situation where a spouse asks why the possibility of policy co-ownership was not offered to their deceased partner seeking to cancel their policy.”

While it may only be a minor proportion of the insured benefit under a policy co-ownership arrangement should an amount be paid to the beneficiaries in the event of a claim, that un-realised future claim benefit amount may form the basis of future litigation had the client elected to cancel their policy and this option was not offered. Mason urges that – as a matter of principle – the possibility of policy co-ownership should always be covered-off as another option by advisers for their eligible clients as a part of serving their best interests.